Clinton V. Reagan On Economic Performance

June 12, 1996

In the debate over tax levels and tax cuts, economic growth and family incomes, performance comparisons between the Reagan years and the recent Clinton years should provide solid guideposts to future policy. Taxes were decreased during the Reagan years; increased during Clinton's tenure.

Here are a few key statistics:

From 1983 to 1989, real gross domestic product increased at an average annual rate of 3.9 percent; but only 2.3 percent in the period 1993-95.

Over the same periods, employment increased at an average annual rate of 2.4 percent under Reagan, 2 percent under Clinton.

During the Reagan years, productivity increased at an average yearly rate of 1.5 percent; but just 0.6 percent under Clinton.

Under Reagan, real after-tax income per capita bounded ahead 2.7 percent -- a rate more than twice the 1.3 percent under Clinton.

These changes occurred within the context of a labor force increasing at a 1.8 percent rate during 1983-89 and 0.8 percent during 1993-95.

Growth in the first quarter of 1996 also happened to be 2.3 percent, although real GDP was only 1.7 percent higher than a year before.

Slower growth of output naturally results in slower growth of real income. And when people are unable to better their lot, worker frustration sets in -- a phenomenon now being reported and examined in the press.

Two additional key comparisons should be noted:

Following tax rate reductions in the 80s, income tax receipts amounted to 8.5 percent of GDP.

Higher marginal tax rates in the '90s failed to bring in widely anticipated additional government revenues -- in fact they fell to just 8.2 percent of GDP.

Despite smaller budget deficits, total national savings dropped to only 15.2 percent of GDP in the past three years -- down from 17.2 percent in 1983-89.

Economists warn that marginal tax rates are much too high, and the tax system is horribly biased against savings and investment.

The predictable result has been little or no progress in livings standards during the past seven years.